LUCKYROAD TRADING LTD v. SANCHEZ, BENJAMIN F. JR.

DCCJ 2389/2019

[2021] HKDC 91

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2389 OF 2019

--------------------

--------------------

------------------------------------------

ASSESSMENT OF DAMAGES

------------------------------------------

INTRODUCTION

1.  This is an assessment of damages arising out of the defendant’s breach of a tenancy agreement entered between him and the plaintiff.  The plaintiff says that, because of the breach, it suffered various losses and damages, including (a) costs for reinstatement works, (b) shortened life span for the teak parquet flooring, (c) loss of one-month rental income for the reinstatement works, and (d) fee for engaging a surveyor.

2.  In absence of notice of intention to defend, the plaintiff obtained an interlocutory judgment against the defendant on 26 June 2019 with damages to be assessed.  The assessment hearing has been held on 22 January 2021 in pursuance of the said judgment.

3.  At the hearing, the plaintiff was represented by Mr Alan So of Messrs Sit, Fung, Kwong & Shum, the plaintiff’s solicitors.  The defendant, who is not legally represented, did not attend the hearing.  Upon the perusal of the 4^th Affirmation of Service of Wu Yuk Shing filed herein on 8 January 2021, I was satisfied that a sealed order of the order made by Master Rita So dated 11 September 2021 (whereby the hearing was fixed) had been duly sent to the defendant at his usual and last known address by ordinary post.  Accordingly, I decided to proceed with the hearing in the defendant’s absence.

4.  At the conclusion of the hearing, I indicated that I would hand down a written decision on 27 January 2021.  This is my decision.

ANALYSIS OF EVIDENCE

5.  Mr So did not call any witness to testify at the hearing.  Pursuant to the aforesaid order of Master Rita So, as well as my order dated 31 December 2020, leave was granted for the plaintiff to rely on the witness statement[1] of Ms Ho Chun Yuen, Irene (“Ms Ho”) as examination in chief, as well as Ms Ho’s affirmation filed on 27 November 2020.  Such evidence is consistent with the documentary evidence and inherently plausible.  I accept them in their entirety.

6.  Again, pursuant to the aforesaid orders of Master Rita So and of mine, leave was granted to the plaintiff to rely on the survey report prepared by the plaintiff’s surveyor, Mr Wong Shun Tai, Stewart (“Mr Wong”), as evidence without calling him to testify.  Mr Wong is a chartered building engineer and has been in the field of surveying premises for about 34 years[2]. I am satisfied that Mr Wong is qualified to give evidence in respect of the cause of damages, the kinds of reinstatement works need to be undertaken to rectify the damages, and the quantum of such works.  I also accept the survey report in full.

7.  Having considered their contents, I give full weight to the documents adduced before me by way of documentary evidence.  I find that they are inherently plausible and consistent with one another.

8.  The defendant did not appear at the hearing and did not adduce any evidence contradicting the plaintiff’s case.  In such circumstances, I accept the plaintiff’s evidence as unchallenged.  I find that the plaintiff has proved its case as set out below.

PLANTIFF’S CASE

9.  The plaintiff is the registered owner of the premises (“the Premises”) comprising[3]:-

(a)  Flat B on 4/F together with the Flat Roof immediately above of Block 2 of Royal Forest, No 11 Sha Tin Heights Road, Shatin, New Territories (“the Property”);

(b)  Car Parking Space No 11 on G/F, Royal Forest, No 11 Sha Tin Heights Road, Shatin, New Territories; and

(c)  Car Parking Space No 42 on G/F, Royal Forest, No 11 Sha Tin Heights Road, Shatin, New Territories.

10.  By a tenancy agreement[4] entered between the plaintiff and the defendant, the plaintiff agreed to let the Premises to the defendant for a term of 3 years commencing from 27 September 2014 at the monthly rent of $31,600[5].

11.  In this action, the plaintiff relies on two clauses of the said tenancy agreement.  Clause 6 provides that[6]:-

“The Tenant shall during the Term keep the interior of the Premises in good and tenantable repair and condition (fair wear and tear and damage caused by inherent defects excepted) and shall deliver up vacant possession of the Premises in the same repair and condition on the expiration or sooner determination of this Agreement.”

12.  Clause 7 further provides that[7]:-

“… If the Rent … shall be unpaid for seven (7) days after the same shall become payable (whether legally demanded or not) …, it shall be lawful for the Landlord at any time thereafter to re-enter the Premises whereupon this Agreement shall absolutely determine and the Landlord may deduct any loss or damage suffered by the Landlord as a result of the Tenant’s breach from the Security Deposit without prejudice to any other right of action or any remedy of the Landlord in respect of such breach of the Tenant.”

13.  Since the defendant failed to pay rents for the Premises in accordance with the tenancy agreement, the plaintiff instituted a High Court Action against him for the recovery of vacant possession of the Premises, as well as the arrears of rent and mesne profits[8].  The plaintiff obtained a judgment from the High Court on 11 September 2017[9].

14.  Shortly after obtaining the said judgment, the plaintiff had access to the Property on 3 October 2017.  It was discovered that the Property was not kept by the defendant in good and tenantable repair and conditions in accordance with clause 6 of the tenancy agreement[10]. The plaintiff then instructed a surveyor, ie Mr Wong, to have a site visit on 5 October 2017[11]. Insofar as the present assessment is concerned, Mr Wong found, among others[12], that:-

(a)  There were stained and scratched marks on the walls and doors;

(b)  There were marks in the kitchen cabinets and the doors of the cabinets were loosened;

(c)  The frame and hinges of the door to the roof were broken;

(d)  There were water damages to the floor and lower part of the wall in the maid room;

(e)  There were scratched marks and water marks on the timber flooring; and

(f)  There were water stains on the marble stone on the bedroom’s widow platform.

15.  In the survey report, Mr Wong opined that the damages were caused by the careless, negligent, or wrongful acts of the defendant[13]. He assessed that the total costs of reinstatement works to rectify the damages amounted to $235,600, including (1) $180,600 as the total costs for the reinstatement works, (2) $15,000 representing the shortened lifespan of the teak parquet flooring, and (3) $40,000 for the loss of rental income for undertaking the repair works[14].

16.  The plaintiff re-entered the Premises and recovered full possession thereof on 21 October 2017[15].

17.  The plaintiff subsequently engaged a contractor, known as Kuen Kee Decoration Engineering Co, to undertake the reinstatement works.  According to the plaintiff and insofar as the items relating to the defendant’s breach are concerned, the costs amounted to $120,300[16]. It is noted at this juncture that not every items of the reinstatement works as suggested by Mr Wong in the survey report was claimed by the plaintiff.

18.  As indicated above, the heads of damages as claimed by the plaintiff include (a) the costs for the reinstatement works in the sum of $120,300, (b) the shortened life span of the teak parquet flooring in the sum of $15,000, (c) loss of 1-month rental income in the sum of $40,000, and (d) the fee for the survey report in the sum of $12,000[17].

LEGAL PRINCIPLES

19.  In his skeleton submission, Mr So relies on Johnson v Agnew[18] for the proposition that:-

“The general principle for the assessment of damages is compensatory, ie, that the innocent party is to be placed, so far as money can do, in the same position as if the contract had been performed …”

20.  He also relies on the following passage as affirmed by the Court in Government Property Administrator v Chinaway Shipping Ltd[19]:-

“… if the plaintiff can establish that his loss consists of or includes the costs of doing work which in breach of contract the defendant has failed to do, then he can recover as damages a sum equivalent to that cost. It is for the plaintiff to establish this: the essential question is, what is his loss.”

21.  I do not think that the above statements are controversial.  In addition, the learned editors of McGregor on Damages also set out the common law principles in respect of the measure of damages for the breach of covenant to repair as follows[20]:-

“Where the action is commenced after the expiration or earlier determination of the term the damages at the common law are such a sum as will put the premises into the state of repair in which the tenant was bound to leave them…

The cost of repairs is the short way of expressing the normal measure; more precisely it should be expressed, … as the cost of repairs with some allowance for loss of rent or occupation during repair and with some deduction, where proper, by reason of substitution of new for old.” 

22.  With these principles in mind, I now turn to the items as claimed by the plaintiff in this action.

DISCUSSION

(1)     Costs of reinstatement works

23.  Having considered the materials placed before me, I am satisfied that the defendant has breached his obligation to repair under clause 6 of the tenancy agreement.  I also accept that the damages as specified in the survey report were caused by the breach of the defendant.

24.  In her witness statement[21], Ms Ho set out the particulars of the reinstatement works and the corresponding costs as follows:-

Item No	Relevant Reinstatement Works	Costs of the Reinstatement Works (HK$)
1	Replastering and repainting ceilings and walls of the Property	58,500
2	Removal and replacement of the aluminium framed door to the roof	7,500
3	Conducting waterproof works for the toilet of the maid’s toilet	3,500
4	Grinding and re-polishing the teak Parquet flooring of the Property	16,500
5	Removal and replacement of the Corian worktop of the kitchen cabinets	12,000
6	Conducting waterproof works for the window of the Property	9,000
7	Cleaning fee after reinstatement	6,500
8	One-month employee insurance and third party liability insurance	6,800
Total costs of the reinstatement works (HK$):		120,300

25.  As I have mentioned, not every item as suggested by Mr Wong was claimed by the plaintiff.  Accordingly, the said costs are less than those originally estimated by the surveyor ($180,600)[22].  As shown in the breakdown of costs annexed to Mr So’s skeleton submissions, the aforesaid costs for reinstatement works are commensurate with the costs for the relevant items as estimated by the surveyor ($128,600). 

26.  In such circumstances, I find that the costs for the reinstatement works are reasonable and would allow the amount ($120,300) as claimed in full.

(2)     Shortened life span of the teak parquet flooring

27.  According to the survey report, the teak parquet flooring of the Property was damaged by dog scratching and stained by dog urine[23]. Notwithstanding the reinstatement works by grinding and re-polishing, the life span of the flooring was shortened by 25%.  It was valued by Mr Wong that the current value of the said flooring was $60,000 (after taking account of 50% depreciation of the value of a new replacement of $120,000[24]).  Accordingly, the plaintiff claims under this head in the sum of $15,000 (ie $60,000 x 25%).

28.  I take account of the fact that the total sum of the grinding and polishing of the teak parquet flooring ($16,500) plus its shortened life span ($15,000) was less than the flooring’s depreciated value ($60,000).  I therefore find it reasonable to claim the shortened life span of the teak parquet flooring in the circumstance. 

29.  I would therefore allow the amount claimed under this head in full.

(3)     Loss of rental income

30.  The plaintiff also claims for the loss of 1-month rental income for the reinstatement works.  As indicated in the common law principle above, I am satisfied that the plaintiff is entitled to be compensated under this head.  However, I note that the monthly rent under the tenancy agreement was only $31,600.  As Mr So agreed at the hearing, there is no evidence before me that the rent would have increased to $40,000 at the time of the reinstatement work. 

31.  Accordingly, I am only prepared to award a sum of $31,600 under this head of damage.

(4)     The fees for the survey report

32.  The plaintiff also claims for the fees for the engagement of the surveyor Mr Wong.  This claim is supported by a receipt issued by the surveyor on 21 February 2019[25].

33.  As I indicated at the hearing, I have difficulty in regarding the said costs as part of the plaintiff’s damages.  In my view, it is clear that the surveyor was engaged in the contemplation of litigation.  Accordingly, such costs should not be regarded as damages directly caused by the wrongdoing of the defendant.

34.  I find it more appropriate to award the costs for engaging the surveyor as part of the plaintiff’s disbursements of this action, instead of parts of its loss and damages.  At the hearing, Mr So raised no objection to this course.  I will therefore consider this head when I deal with the plaintiff’s costs of the present assessment proceedings.

(5)     Summary

35.  Accordingly, I would assess the total amount of the plaintiff’s losses in a total sum of $166,900 (ie, $120,300 + $15,000 + $31,600). 

36.  Final judgment is to be entered in the plaintiff’s favour at the said amount.

INTERESTS

37.  While Mr So did not make any submission in respect of interests in his skeleton submission, he submitted at the hearing that the plaintiff should be entitled to the pre-judgment interests calculated from the date of the demand letter (26 March 2019) at the best lending rate as quoted by HSBC. 

38.  I note that the plaintiff had actually paid the reinstatement costs back in November and December 2017[26].  I also bear in mind the basic principle that interests are awarded to the plaintiff to compensate for being kept out of the money which ought to have been paid by the defendant[27].

39.  Accordingly, I find Mr So’s submission reasonable.  I would award pre-judgment interests from 26 March 2019 at the best lending rate until the date of this assessment.

40.  The plaintiff shall also be entitled to interests thereafter at the judgment rate until full payment.

COSTS

41.  Since the plaintiff is able to obtain a judgment for more than a nominal sum, it should be entitled to costs. According to the statement of costs, the amount incurred by the plaintiff was $39,228.  I find this sum reasonable.  I would just make a slight adjustment as to the costs for the attendance of the hearing, as it only lasts 20 minutes instead of 2 hours.  By a broad-brush approach, I fix the plaintiff’s costs at $36,000.

42.  As I said, I am also prepared to award the costs of the survey report as part of the plaintiff’s disbursement. The surveyor charged $12,000, and I find it reasonable.  I will therefore award the amount in full.

43.  Accordingly, I award the plaintiff’s costs and disbursements at the total sum of $48,000 ($36,000 + $12,000).

DISPOSITION

44.  For the above reasons, final judgment is entered in the plaintiff’s favour against the defendant in the sum of $166,900, together with interests accrued thereon at the best lending rate of HSBC from 26 March 2019 to the date of this assessment, and thereafter at the judgment rate until full payment.

45.  I also order that the defendant do pay the plaintiff’s costs and disbursements of this action, including this assessment of damages, summarily assessed at $48,000, payable forthwith.